This is an opportune time to speak to the issues affecting the electric industry. As I'm sure you know, a number of bills bearing on the electric industry were introduced in the 104th Congress, including a couple dropped in the hopper during the final week. It's worth noting that none of them went anywhere this year -- and, speaking as someone who's looking forward to a number of constructive changes in the 105th Congress, that's probably just as well.

Regardless of which party controls the Congress, the level of interest and flurry of proposals on electricity policy will continue. All manner of folk have ideas about how to modify, improve, alter and otherwise tinker with the Federal Power Act and other relevant laws. The House Commerce Committee, of which I am a Member, will have the serious responsibility of sifting through the various proposals to separate the lame from the meritorious, the merely opportunistic from the thoughtful -- and to determine what, if anything, Congress can or should do to foster the continued well-being of the U.S. electric industry and consumers' interests.

Since I am speaking to an audience that is well-versed in the stock market, I also will point out that the Commerce Committee has jurisdiction over the securities laws. As this debate on electricity policy goes forward, it is incumbent upon us to bear in mind the interests of current investors in utility stocks. As is so often the case, the prospect of economic opportunity for some poses unwelcome risks for others -- and in this case investors as well as consumers would be affected by changes in electricity regulation.

At the outset, let me say that I approach the question of whether Congress ought to attempt to "reform" the industry with caution. Today, the U.S. electricity industry is the most reliable, financially sound system in the world. That is no accident. In the past two decades the industry has by and large responded successfully to changing demand forecasts, to environmental concerns, and to social obligations such as maintaining service to low-income consumers.

I agree with others who have observed that this is not an industry in crisis. There is, however, a real danger that Congress could bring the industry to the brink of crisis if it proceeded recklessly along the path of a rigid philosophy or dogma. In my opinion, several of the proposals introduced during the 104th Congress were longer on economic theory than practicality, and not supported by adequate analysis. Given the importance of the electric industry to our economy, it behooves Congress to observe the ancient wisdom of the hippocratic oath -- "first, do no harm."

This is not to say that the electric industry should rest on its laurels, or that Congress should not conduct a full, deliberate, and critical review of existing law in light of changes in the industry. It is possible that the Power Act and the Public Utility Holding Company Act, which have remained largely unchanged since the 1930's, may now be dated. It is Congress' job to understand change in today's electric industry and to ensure our laws properly balance consumer protection with the industry's need to respond to the consumer and to new technologies.

Before I turn to the present legislative debate about retail competition, I'd like to make some brief observations about what Congress did in the 1992 Energy Policy Act with respect to changes in wholesale markets. I want to underscore that Congress did not prescribe the course of change. That arose primarily from a natural evolution of the market and not from a legislative edict. By the time Congress enacted the Energy Policy Act, many utilities had come to rely on wholesale power transactions as a means of getting excess power from those who wanted to sell it to those who wished to buy it.

The 1992 Act was in fact a response to this evolution, through which Congress recognized the significance of the expanding wholesale power market and took two important, carefully tailored steps. First, Congress amended the Federal Power Act to ensure that "FERC" had the authority to prevent discrimination in the use of interstate transmission lines. Second, Congress amended the Public Utility Holding Company Act to permit entities other than traditional utilities to generate and sell power -- under contract -- to willing wholesale buyers.

At the time, the question of whether and how to make these changes was very controversial. However, we took the time and care in the legislative process to craft responsible legislation which I believe has benefited both industry and the consumer. Let me emphasize, and underscore, that this was not done overnight and could not have been achieved without the assistance of industry, consumers large and small, environmentalists, and all the other interested parties.

Today we hear calls for "comprehensive reform" of a much more far-reaching character -- changes which would dictate a virtual transformation of the industry. Of course, there is an enormous amount of change underway at the state level -- indeed, some suggest the actions of state legislatures and public utility commissions require Congress to act in order to avoid conflicts and to ensure that all consumers secure the benefits of retail competition.

I have listened to the arguments calling for Congress to intervene in this process with great interest. Like so many other issues in the 104th Congress, the electricity debate has made for strange bedfellows and odd posturing. On my own committee, my good friends Chairman Schaefer and Chairman Bliley have set aside states rights concerns in order to embrace the competing philosophy of "competition". Never mind that over 40 states already are considering the potential benefits of retail competition citizens and some -- California and the New England States -- have already concluded this is the way to go.

I confess to being somewhat puzzled as to why the Congress should interfere with a healthy and constructive process at the state level. It's hard to make a case that the states are avoiding the issue or footdragging when so many have embarked on retail wheeling experiments and others are actively considering proposals for change. For my own part, I have not reached a conclusion as to whether or not the U.S. electricity as a whole needs to be "reformed" at this point in time. Moreover, I am not convinced that if broad systemic change is in fact desirable, it is necessary or helpful for the Congress to decree how that should occur.

Let me turn now to some specific concerns I have about legislative activity we was in the past two years, and what I expect to develop in the 105th Congress.

As I mentioned, a number of legislative proposals were introduced during the past two years. My good friend Dan Schaefer, Chairman of the House Energy and Power Subcommittee, introduced a bill requiring states to switch to retail competition by 2000. This was a provocative proposal, and a useful one. If there was any doubt about the difficulties attending so bold an effort, there are few left now. The Schaefer bill was enthusiastically supported by some -- particularly large industrial consumers. But it was also criticized roundly by others, for what it contained and for what it left out.

One lesson we can draw is that while many interests are willing to consider changes to Federal electricity laws, the price for their support is a "leveling of the playing field" -- as they perceive it -- to ensure they are not harmed. Thus, some utilities demand compensation for stranded investment. Investor-owned utilities want public power and Federal entities such as TVA and Bonneville to relinquish tax and marketing advantages. Registered holding companies which are subject to the extensive S.E.C. regulation under "PUHCA" want to be placed on equal footing with the so-called "exempt" holding companies. I've probably missed some issues, but those I've touched on make for a full plate of complex, demanding issues which will have to be dealt with before there is a political consensus in support of legislative change.

With respect to action in the next Congress, I'm sure you all have some acquaintance with the basic issues. I thought it might be helpful today to focus on a few issues which are gaining steam and will make the legislative equation that much more complicated.

First, I believe there is a growing concern about the impact of legislative change on shareholders interests. I need not dwell on this before this audience, which is well aware of the profile of many utility shareholders. Parties that wished to invest their money conservatively, including individuals and entities such as pension funds, will not hesitate to make their concerns known to members of Congress. You all are familiar with the dramatic impact the California "blue book" had on utility stocks. That lesson will not be lost in the debate.

Another very interesting issue which has only recently crystallized is the potential environmental impact of federally mandated retail competition. I have to say right off the bat that I am somewhat skeptical of claims that competition in electricity markets -- either at the wholesale or retail level -- will increase pollution. Nonetheless, in recent weeks a broad coalition of national environmental groups served notice that they view this as a real threat. They are demanding that Federal legislation to promote retail competition must incorporate air quality protections. Those of you who observed the very difficult battles attending the 1990 Amendments to the Clean Air Act will appreciate what a quagmire such issues present.

Finally, with respect to issues gaining steam for next year's debate, I'd like to briefly touch on the states' rights issue. As I indicated earlier, this topic has a way of bringing out inconsistencies in the positions members of Congress take on various legislative questions. It will be interesting indeed to observe how members who typically honor state prerogatives reconcile themselves to the siren call of federally mandated retail competition. As I noted earlier, the majority of states have engaged the retail competition issue, either in their legislatures or their regulatory bodies. To my knowledge, no governor has asked the Congress to preempt the states in this arena -- and I do not expect this to change.

It is worth noting as well that some of the bills introduced last year raise serious constitutional questions regarding the limits of Congressional authority under the 10th Amendment. Certainly there is no doubt that electricity is in interstate commerce, and as such can be regulated by the Federal Government to ensure the nation's well-being. However, it is quite another matter to mandate that states take legislative or regulatory action to carry out a preemptive federal electricity mandate. The Supreme Court has ruled this approach unconstitutional in several recent cases, and this casts serious doubt on the approach taken in some of the bills introduced during the last Congress.

Before closing my remarks, I'd like to offer a few observations on the legislative process. As I have indicated, the issue electricity "reform" is very complex. You may have gathered from my remarks that it is not in my opinion ripe for legislative action. That can change, and I expect that Congress will spend a good deal time studying and debating the need for federal legislation whether or not a bill eventually is enacted. Indeed it is our responsibility to review existing statutes from time to time and to reevaluate their impact as circumstances change.

However, Congress also has the responsibility to know what it is doing -- to look very carefully before it leaps and takes the country off the cliff. If Congress decides that federal legislation is in order, that will have to be preceded by a very thorough and deliberative legislative process. I have learned over the years that no matter how good an idea sounds at first, careful examination is in order. In some instances, the legislative process reveals to us that we are headed in the wrong direction. In others, it shows how a good idea can be improved. In all cases, a thorough process increases the odds that the Congress will have a reasonably clear notion of what it's doing before it enacts new law.

I have enjoyed the opportunity to speak to you about some of my thoughts and concerns about electricity policy, and I look forward to hearing from our other distinguished speakers.

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